Tuesday, 29 July 2014
Last updated 17 hours ago
Aug 9 2013 | 10:54am ET
When the Securities and Exchange Commission lost a market-timing lawsuit before the U.S. Supreme Court earlier this year, it also lost millions in fines in another market-timing case.
Citing the high court's February ruling that fraud lawsuits must be filed within five years of the alleged crime, the U.S. Second Circuit Court of Appeals slashed the penalty levied against hedge fund Pentagon Capital Management and its founder. The court ordered the two to pay a combined $38.4 million in disgorgement, but said that the civil fine against the two must be cut. The trial-court judge had ordered Pentagon and Lewis Chester to pay nearly $90 million in disgorgement, civil penalties and prejudgment interest.
The issue? The SEC accused Pentagon of defrauding mutual funds with a late-trading scheme from June 1999 through September 2003—but didn't sue until April 2008.
The court did uphold the lower-court finding against Pentagon and Chester. Pentagon, which Chester shuttered just before the SEC sued, and its founder had argued that they did not seek to deceive anyone with their practices, and could not be held primarily liable for securities fraud as investment advisor. But Chief Circuit Judge John Walker wrote that late-trading is inherently deceitful.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…